While mergers and acquisition often have grand plans for success, the reality is that only 20% of mergers and acquisitions are. Another 60% are mere disappointments and another 20% are complete and utter failures. In order to increase the chances of a successful merger, the merging organizations must be similar and one should be larger than the other.
Since the start of the new year, Postmedia, the owner of The Edmonton Sun and The Edmonton Journal, have been working on merging the two papers. Postmedia also has similar mergers occurring in 3 other cities across Canada; Calgary, Ottawa and Vancouver. The reason for these merges are that printing revenue is on the decline, so merging two companies together makes more sense financially. So far these mergers have caused over 90 jobs to be cut with 60 of these jobs cut in Alberta. The reason for the layoffs is that after a merger of two companies, there tends to be duplicate job positions. Will these mergers be successful? Andrew Potter, the editor-in-chief of Ottawa Citizen says it will be up to readers to decide if Postmedia’s merger plans will work.
When there are mergers and acquisitions, the original organization’s degree of freedom can vary. When Loblaw acquired Shoppers Drug Mart for $12.4 billion, Shoppers Drugmarts and Loblaws continued to maintain their separate stores. After this deal however, Loblaw products were sold in Shoppers and Shoppers’ healthcare products were sold in Loblaw organizations. Each organization benefitted from playing off of each other's strengths. Both Loblaws and Shoppers Drug Marts were able to expand and grow with this merger.
The 2008 Bank of America acquisition of Countrywide (a mortgage lender) is an example of an acquisition failure. Because of timing, the 2.5 billion dollar deal ended up costing the Bank of America more than $40 billion. Countrywide is a financial institution that deals in the housing market which happened to be collapsing during the time of the acquisition. Life can be unpredictable and going into a merger or acquisition always contains some risk.
Mergers and acquisitions can be a time of confusion, stress and anxiety, but not all mergers are ultimately bad news. They are bound to bring along change for both companies that take part, but with a willingness to cooperate together and the ability to listen and use each other’s strengths, they have a great possibility of success.